1.

0 INTRODUCTION The Report of the Auditor-General on the Statement of Foreign Exchange Receipts and Payments of the Bank of Ghana for the first half year ended 30th June, 2008 was laid in the House on Tuesday 10th November 2009. This Report was referred to the Public Accounts Committee pursuant to Article 184 (3) of the 1992 Constitution and in accordance with Standing Orders 165 for consideration and report. To consider this report, the Committee met with officials from the Audit Service, the Controller and Accountant Generals Department and the Bank of Ghana. 2.0 REFERENCES The Committee referred to the following relevant documents:1. The 1992 Constitution of the Republic of Ghana 2. The Standing Orders of Parliament of Ghana 3. The Bank of Ghana Act, 2002 (Act 612) 4. The Foreign Exchange Act 2006, Act 723 5. The Minerals and Mining Law, PNDC Law 152 3.0 BACKGROUND The Bank of Ghana is obliged to submit to the Auditor-General for audit on half-yearly basis a Statement of its Foreign Exchange Receipts and Payments in accordance with Article 184 of the 1992 Constitution. Under Article 184(3) of the 1992 Constitution, the Auditor-General is also enjoined to audit these Statements and submit his reports on them to Parliament. 3.1 AUDIT OBJECTIVE The audit objective was to obtain reasonable assurance that the statements of foreign exchange receipts and payments taken as a whole are free from material misstatements. 4.0 FOREIGN EXCHANGE RECEIPTS AND PAYMENTS

4.1 RECEIPTS Foreign exchange receipts or inflows to Bank of Ghana are captured under the following classification: 1. Cocoa receipts 2. Gold receipts 3. Diamond receipts 4. Manganese receipts

5. Capital receipts in the form of loans and grants. E.g. HIPC Reliefs (off-shore)among others 6. Invisible Receipts derived from the sale of travelers cheques, interests, commissions, investments on treasury bills, interest on Bank for International Settlement (BIS), investment interest and forex purchase, 4.2 PAYMENTS The Bank of Ghana makes foreign exchange payments under the following broad categories:1. Visible import payments consisting of oil, non-oil as well as other visible import payments. 2. Capital payments involve loan repayments to bilateral and multilateral institutions. 3. Invisible payments consist of Manpower, Training and Development (Student Transfers), Contractual payments, Embassy transfers, Management and technical services, Capital subscriptions and Sundry payments. 5.0 OBJECTIVE OF THIS REPORT The objective of this report is to present to the House the salient issues in the audit report of the Auditor-General on the Statement of Foreign Exchange Receipts and Payments of the Bank of Ghana for the first half year ending 30th June 2008 as well as the comments of your Committee on the findings and recommendations of the Auditor-General. 6.0 OVERVIEW OF FOREIGN EXCHANGE RECEIPTS AND PAYMENTS

6.1 FOREIGN EXCHANGE RECEIPTS The total foreign exchange received by BoG for the first half of the year 2008 was US$1,230.54 million. Compared with US$1,054.97 million for the corresponding period of 2007, there was an increase of US$175.56million (16.6%). Find attached the schedule of the Statement of Foreign exchange receipts for the first half of the year as Appendix 1 The main components of the foreign exchange receipts are Cocoa, Gold, Diamond, Manganese, Capital Receipts and Invisible Receipts. Table 1 gives the breakdown of total foreign exchange receipts for 2008 as compared with 2007 receipts. TABLE 1: Composition of Foreign Exchange Receipts Item Cocoa Capital Receipts 30-Jun-08 253,896,031 322,527,767 30-Jun-07 237,474,235 290,225,665 Difference 16,421,796 32,302,102

Invisible Receipts Gold Manganese Diamond Total

443,780,258 206,879,162 3,453,199 1,230,536,417

379,484,510 146,115,485 1,587,985 85,196 1,054,973,076

64,295,748 60,763,677 1,865,214 (85,196) 175,563,341

6.1.1

DETAILS OF FOREIGN EXCHANGE RECEIPTS

6.1.1.1 Cocoa COCOBOD surrenders 98% of all its foreign exchange receipts from cocoa to Bank of Ghana and retains 2% to meet its import needs. As at June, 2008, total Foreign Exchange receipts surrendered to BoG from COCOBOD amounted to US$253,896,031. This figure, compared with the figure of US$237,474,235 for 2007 for the same period, showed an increase of US$16,421,796. US$159 million was used to finance the Syndicated Trade Credit facility. Find attached the schedule of cocoa receipt for first Half of the year as Appendix A TOTAL TONNAGE EXPORTED Total tonnage of Cocoa beans and cocoa products exported for the first Half of the year amounted to 416,165 tons. Table 2 gives the breakdown in tons of cocoa beans and cocoa products exported in 2008 as compared with 2007. TABLE 2: Total Tonnage Exported Item Cocoa Beans Cocoa Products Total 30-Jun-08 382,859 33,306 416,165 30-Jun-07 374,384 45,215 419,599 Difference 8,475.00 (11,909.00) (3,434.00)

6.1.1.2 GOLD Total gold earnings surrendered to BoG for the period amounted to US$206.88 million. This figure was significantly higher by US$60.76 million over the total amount of US$146.12 million received for the same period for 2007. These inflows represent portions of proceeds that are to be remitted to the country through the Bank of Ghana by licensed gold exporters. Percentages surrendered are between 20% and 40% of total gold exports.

The Table 3 shows the list of Gold Companies operating in Ghana and their repatriation percentages and amounts for the year under review:Table 3: Repatriation of Earnings from Gold Exports Retention % 60 80 80 75 80 80 80 75 80 Expected Surrender % 40 20 20 25 20 20 20 25 20 Actual Surrender % 40 20 20 25 20 20 20 25 20

Company 1 2 3 4 5 6 7 8 9 AngloGold (Obuasi) AngloGold (GAG) AGC(Bibiani) Abosso Gold Fields Goldfields Golden Star (Bogosso) Golden Star (Wassa/Wexford) Prestea Sankofa Chirano Goldmines Total

Total US$ 59,859,674.12 16,385,942.99 2,271,485.85 22,206,080.13 60,798,485.44 13,823,460.05 11,368,739.56 1,413,111.60 18,752,182.12 206,879,161.86

For the period under review, a total of 1,325,348 ounces of gold was exported. Compared with an amount of 1,259,408 ounces for the same period of 2007, there was an increase of 5.2% or 65,640 ounces. Find attached the schedule of Gold Receipts for the first half of year as Appendix A. 6.1.1.3 DIAMOND No diamonds were exported during the period. This was due to the closure of Ghana Consolidated Diamonds Company Limited. 6.1.1.4 MANGANESE Total Foreign Exchange receipts surrendered to BoG from the export of manganese amounted to US$3.45 million. This represents 20% of total export receipts repatriated into the country by the Ghana Manganese Company. The Company retained the remaining 80% of its receipts offshore to meet its import needs. Please find attached details of Manganese Receipts for the first half of year as Appendix A. 6.1.1.5 CAPITAL RECEIPTS Total Capital Receipts in the form of loans and grants for the half year amounted to US$322.52 million.

Table 4 provides the breakdown of the various sources of Capital Receipts for the year as compared with 2007: Table 4: Sources of Capital Receipts Agency IDA Grant Swiss Grant UK Grant Canadian Grant Danish Grant World Bank Loan IMF Income French Grant Netherlands Grant HIPC Reliefs (off shore) E.U. Grant Total 2008 US$ 8,719,112 88,126,333 16,483,626 22,900,904 98,119,040 16,698 20,121,098 36,885,649 31,155,307 322,527,767 2007 US$ 2,595,777 7,318,139 78,595,444 14,387,272 6,216,700 110,078,705 17,035 19,618,250 33,499,866 17,898,478 290,225,666 Differences (2,595,777) 1,400,973 9,530,889 2,096,354 16,684,204 (11,959,665) (337) 502,848 3,385,783 (17,898,478) 31,155,307 32,302,101

From the Table, there was an increase in capital receipts of US$32.3 million. This increase is mainly from a significant increase in Danish Grant of US$16.68%million.

6.1.1.6 INVISIBLE RECEIPTS Total invisible receipts amounted to US$443.78 million for the first half of the year. Table 5 shows the composition of Invisible Receipts for 2008 as compared with 2007. Find attached the schedule of invisible receipt for the first half of year as Appendix B.

Table 5: Composition of Invisible Receipts Item Travellers Cheque Other Interest & Comm JP Morgan Investment Treasury Bills Investment 2008 US$ 3,136 6,752,666 6,618,698 2007 US$ 2,481 22,583,001 1,868,028 Difference 655 (15,830,335) 6,618,698 (1,868,028)

Central Bank Facility Interest on BIS Portfolio UBSGAM Sovereign Bond Forex Purchase Total

1,460,054 12,071,793 3,144,164 327,648,980 99,318,162 443,780,257

1,567,227 9,701,121 8,679,742 335,082,911 379,484,511

(107,173) 2,370,672 (5,535,578) 327,648,980 (235,764,749) 64,295,746

From the Table, there was an increase in invisible receipts of US$64,295,746. The increase was mainly due to the proceeds from Sovereign Bonds during the period. Details of Invisible Receipts are attached as Appendix C. 5.2 FOREIGN EXCHANGE PAYMENTS

The total foreign exchange payments made by BoG for the first half of the year 2008 amounted to US$1,805.03million. Foreign exchange payments are usually made up of visible imports, capital payments, and invisible payments. Visible imports are made up of Oil, Non-Oil and other imports. Attached is the schedule of foreign exchange payment for the first half of year as Appendix 1 Table 6 shows the summary of payments made during the period compared with 2007 Table 6: Summary of payment Analysis of foreign exchange payments Item Visible Imports Capital payments Invisible payments Total 30-Jun-08 1,317,357,400 195,326,653 292,349,234 1,805,033,286 30-Jun-07 862,918,473 84,060,941 273,606,574 1,220,585,988 Difference 454,438,927 111,265,712 18,742,660 584,447,298

5.2.1

DETAILS OF FOREIGN EXCHANGE PAYMENTS

5.2.1.1 VISIBLE IMPORT PAYMENTS Visible imports consist of oil, non-oil as well as other imports. Visible import payments for the period amounted to US$1,317.36 million. Table 7 shows the breakdown of Visible Imports.

Table 7 Breakdown of visible imports Visible import payment for the first half of 2008 and 2007 Item Oil Non-Oil Other Imports Total 30-Jun-08 818,227,945 408,456,220 90,673,235 1,317,357,400 30-Jun-07 578,014,935 121,150,000 163,753,538 862,918,473 Difference 240,213,010 287,306,220 (73,080,303) 454,438,927

Total Visible Imports increased by US$454,438,927. The Committee was informed that the increase was as a result of the rise in the prices of oil on the world market and increase in foreign exchange sales to dealer commercial banks to finance the import needs of their customers. Find attached the schedule of visible payment for the first half of year as Appendix D 5.2.1.2 CAPITAL PAYMENTS Capital Payments for the first half of the year amounted to US$195,326,653. This represented an increase of US$111.27 million over the figure of US$84.06 million for the period under review. The increase in capital payments was attributed to a rise in miscellaneous capital payments and interest paid on sovereign bonds during the period. Please find attached the schedule for Capital Payments for the first half of year as Appendix E 5.2.1.3 INVISIBLE PAYMENTS Total Invisible Payments for the period amounted to US$292,349,234. This is made up of payments made in respect of Manpower, Training and Development, Management and Technical fees, Embassy transfers, Contractual payments, Capital subscriptions and Sundry expenses. Table 8 shows the breakdown of the payments as compared with payments made during the period. Table 8: Breakdown of the Invisible Payments 30-Jun-08 Contractual Payments Manpower, Training Development 120,332,545 and 4,423,240 49,299,901 2,007,817 47,376,108 2,415,423 1,923,793 30-Jun-07 64,715,820 Difference 55,616,725

Management and Technical Fees

Embassy Transfers Capital Subscriptions Sundry Expenses Total

32,026,751 2,056,342 84,210,456 292,349,235

35,981,531 3,452,833 120,072,464 273,606,573

(3,954,780) (1,396,491) (35,862,008) 18,742,662

According to the Table, total invisible payments for the period increased by 7%. The increase was mainly due to increases in Manpower, Training and Development and Contractual payments. The increase was as a result of an upsurge in the number of government sponsored students abroad with respect to Manpower, Training and Development; and a rise in the number of contractual projects undertaken during the period including the construction of the Bui Dam and the Installation of 49.5MW Tema Emergency Power Plant with respect to Contractual Payments

However there was significant decline in payments made with respect of Embassy Transfers, Capital Subscriptions and Sundry Expenses. Attached is the schedule of Invisible payments for the first half of year as Appendix F. 5.3 Statement of Foreign Reserve Assets The Banks Reserve Position as at 30th June 2008 was US$2,644,219,863 with a corresponding figure for the previous year of US$2,129,198,022. Foreign Reserve Assets therefore increased by US$515,021,841 or 24.2%.

The details of the components of the Foreign Reserve Assets are provided in Table 9. Table 9 showing details of the components of the Foreign Reserve Assets 30th June 2008 Gold Holdings of SDR Corresponding Bank Balance Foreign Notes and Coins Foreign Securities Fixed Deposits Reserve Postion IMF 235,744,754 1,875,185 384,547,137 17,607,125 1,977,857,269 30th June 2007 178,073,149 1,477,006 1,241,673,160 18,607,550 68,412,575 594,461,015 Difference 57,671,605 398,179 (857,126,023) (1,000,425) (68,412,575) 1,383,396,254

HIPC Trust Investment Investment in GIB London Investment In Afrexim Bank 1,583,569 23,004,824 2,000,000 2,644,219,863

1,488,745 23,004,824 2,000,000 2,129,198,024

94,824 515,021,839

Attached is the schedule of Statement of Foreign Reserve Assets for the first half of year as Appendix G 5.4 Foreign Exchange Receipts and Payments (Net Position) Bank of Ghana recorded a net deficit of US$574.5 million for the period under review. The deficit was mainly caused by increases in visible imports as well as invisible payments. 6.0 FINDINGS AND RECOMMENDATIONS 6.1 HIPC Reliefs A total of US$154,650,533 was received as HIPC Relief as at 30th June 2008. This receipt was in respect of on-shore reliefs. Off-shore HIPC Reliefs represent foreign exchange inflows to Bank of Ghana while on-shore HIPC Reliefs involve the retention of foreign exchange in the country through the cancellation of principal and interest on loans which matured during the period. 6.2 Sovereign Bonds As at 30th June 2008, total drawdown receipts from the Sovereign Bonds, floated on the international market amounted to US$327.64million. 6.3 External Account holders Contrary to the Committees recommendations, only 14 out of 30 External Account Holders submitted their accounts balances as required during the period under review. The defaulters include Ghana Telecommunications, Timber Export Division, COCOBOD, Land Title Registry, Minerals Commission, Wexford Goldfields Limited, Anglogold Ashanti, State Insurance Company, and Ghana Consolidated Diamonds. This practice hinders the Bank from effectively monitoring the activities of these institutions as to the utilization of the accounts. Recommendation The Committee observed that in spite of its efforts to ensure that BoG causes the External Account holders to submit their account balances on time, the practice still persists.

The Committee therefore demands that Bank of Ghana withdraws the permits of those organizations that have failed to submit their bank balances and other returns to the BOG in order to discourage non-submission of returns by external account operators. 6.4 Errors/understatements/overstatements and misclassifications The Committee noted that in the compilation of the Statement of foreign exchange receipts and payments for the period, there were a number of errors which eventually resulted in the revision of various figures. These are shown below: Overstatement of Capital Receipts US$8, 052,562 The audit revealed that Bank of Ghana overstated Swiss Grant received during the period by US$8,052,562. Ghana was supposed to have received a total amount of US$16,771,674. Unfortunately only US$8,719,112 was received. The Bank, in passing its entry, mistakenly repeated the amount of US$16.77 million in the statement of receipts and payments instead of US$8.72 million actually received for the period under review. Errors of Omission Corresponding Bank Balances amounting to US$ 384,547,136 was understated due to an omission of US$5,071,047 representing the bank balances of GIB London Stabex and GIB London Operating Accounts. Total proceeds from Sovereign Bonds amounting to US$ 329,473,500 were understated by US$1,824,520 due to the omission of ECG prepaid meter project from the schedule of Sovereign Bonds purchases. Again forex sales of US$1,700,000 to Barclays Bank and Standard Chartered Bank have been omitted from total forex sales for the period. Two foreign exchange payments for GETFUnd and the District Assemblies amounting to 6.5million were also omitted from the total visible payments for the period. Understatements A total amount of US$3.52 million representing foreign exchange purchases from local sources was omitted from the Invisible receipts schedule leading to an understatement of the total figure. This error occurred due to understatements of June monthly figures stated by the bank and lack of coordination between schedule officers. This error was subsequently rectified and the receipts were revised from US$16,626,936 to US$20,172,497.

Misclassification of forex receipts Bank of Ghana also misclassified Forex Sales amounting to US$1.5million when preparing the foreign Exchange receipts and payments for the period.

The Committee was informed that these errors were rectified and revised accordingly when brought to the attention of Bank of Ghana. That notwithstanding Members expressed dissatisfaction about the occurrence of these errors and omissions. Recommendation The Committee recommends that the BoG strengthen its internal and supervisory control systems over the preparation of the statement of foreign exchange receipts and payments in order to eliminate errors and omissions. The BoG must note that a public document of this nature should not make room for inaccuracies. 7.0 AUDIT OPINION The Auditor-General indicated that in his opinion, the Statements fairly represent the foreign exchange position Bank of Ghana as at the first half year ended 30th June, 2008. 8.0 CONCLUSION The Committee noted that most of the issues raised have been raised in its earlier reports to the House. The Committee therefore demands that Bank of Ghana take the necessary steps to implement the Committees recommendations. The Committee recommends to the House to adopt this Report on the Report of the Auditor General on the Statement of Foreign Exchange Receipts and payments of the Bank of Ghana for the first half of the year ended 30th June 2008. Respectfully submitted.

HON. ALBERT KAN-DAPAAH CHAIRMAN

MR. ASANTE AMOAKO-ATTA CLERK TO THE COMMITTEE 16th June 2010

IN THE SECOND MEETING OF THE SECOND SESSION OF THE FIFTH PARLIAMENT OF THE FOURTH REPUBLIC

REPORT OF THE PUBLIC ACCOUNTS COMMITTEE ON THE REPORT OF THE AUDITOR-GENERAL

ON

THE STATEMENT OF FOREIGN EXCHANGE RECEIPTS AND PAYMENTS OF THE BANK OF GHANA FOR THE SECOND HALF OF THE YEAR ENDED 31ST DECEMBER, 2008

June 16th 2010